It’s that time of the year again when some of India’s states are going to elections in a huge expression of our faith in democracy. Of course, this time these come against the backdrop of the SIR (Serious Internal Revision) exercise of our electoral rolls that has become particularly controversial in states like West Bengal. What’s interesting is that two of the states holding assembly elections this month are from the eastern part of India – Assam and West Bengal – both of which have a significant Muslim and other minorities population. One of them, Assam, is already ruled by the BJP and has conducted CAA, NRC, and delimitation exercises, the last of them in order to redraw constituencies. These were controversial as well, as they were conducted to determine the citizenship of Assam residents many of whom are deemed illegal immigrants from Bangladesh, and the redrawing of constituencies should favour the incumbent BJP government in the state.
In Bengal, the TMC (Trinamool Congress) government protested the way the SIR exercise was conducted and the matter even went to the Supreme Court. Even after their intervention, around 25% of West Bengal’s voters have been deleted from the voters’ list. Many of these are said to belong to the Chief Minister, Mamata Banerjee’s own constituency as well. The BJP has been trying to topple Mamata’s government for years but in vain, although they have improved their standing in West Bengal.
There are two other states going for assembly elections, and these are from southern India, Kerala and Tamil Nadu. In both these states minorities and lower castes have always enjoyed the support of whichever party or coalition has been in power, and although the BJP has been eyeing these states as well, it has only managed an alliance with AIADMK (a regional party) in Tamil Nadu and will find it hard to play the communal card in either of these two states. In Kerala, it is fighting both the LDF (Left Democratic Front) and the UDF (Congress-led United Democratic Front), and the contest is said to be mainly between the Left and the Congress-led alliance.
From all the reporting that one reads or hears from these states in the news – which isn’t very much unfortunately – it appears that the status quo might prevail. Of course, there is always the possibility that in Kerala the UDF could return to power since the state usually swings from one alliance to the other. However, since the LDF managed to retain power in the previous state election, they might be given yet another chance this time. There don’t seem to be any major election issues in any of these four major states – or indeed in Puducherry – that could see the incumbent party ousted. Yes, unemployment and inflation are complaints, but these are pan-India problems and might not be grave enough to topple governments in the states going to elections this time.
On that note, it makes sense for us to look at the economies of these four states and see how they are faring and where there might be problem areas that need to be addressed. I have considered the statistics available at RBI’s website for examining the states’ economies, which end with 2024-25 – for some indicators, it ends earlier. At first glance, it appears that Assam and West Bengal have larger economic vulnerabilities and concerns than Tamil Nadu and Kerala, even though their states’ GDP grew at 7.71% and 6.81% respectively in 2024-25.
For one thing, Assam and West Bengal have lower own tax revenue to state GDP, at 9.7% and 10.83% respectively. And they have very high social sector spending as a percentage of their GDP as well, at 45% and 54.2% respectively. This must be putting immense pressure on their fiscal position and their debt levels. The gross fiscal deficits of all states seem to have risen sharply around demonetization and then again from the Covid pandemic years onwards. I am not sure why Assam’s gross fiscal deficit jumped sharply in one particular year, from Rs 47 billion in 2018-19 to Rs 148 billion in 2019-20 and continued to increase since. Besides, Assam seems to suffer from high unemployment at 7.4% and also a higher rate of multidimensional poverty at 19.35%. West Bengal, on the other hand seems to have a low unemployment rate of 3.3%, but has a multidimensional poverty rate of 11.89% and a declining enrollment rate in higher secondary education from 81.2% in 2022-23 to 75.2% in 2024-25.
This might partially explain why the social sector spending of both Assam and West Bengal is so high, and I think that although the number of factories in both the eastern states are rising, they could do with a big industrialization boost that creates more jobs in the states; it is a well-known fact that people from both Assam and West Bengal seek employment elsewhere as job opportunities are few. Linked to this is obviously the area of education – especially higher education – that must receive greater attention and investment.
The southern states, Kerala and Tamil Nadu perform better economically and grew at 6.2% and 11.23% respectively in 2024-25. Tamil Nadu’s GDP growth has been quite phenomenal in recent years; it seems the state added approximately Rs 1 trillion each year to state GDP since 2021-22. Kerala’s and Tamil Nadu’s own tax revenue as a percentage of state’s GDP were also reasonably good at 12.37% and 11.25% respectively. However, they can and should always aim higher; Uttar Pradesh raises own tax revenue as percentage of GDP at 17.06% and Maharashtra leads at 18.92%.
Kerala’s unemployment rate is high at 6.7%, though it does best in educational (higher secondary) enrollment rate and in multidimensional poverty, the latter at 0.55% and probably the best in all of India. Tamil Nadu also does well in school enrollment ratio and has a multidimensional poverty of only 2.2%. Unemployment is at 4.1%. In both these states, social sector spending as a percentage of state GDP is lower as a consequence; it is 32.2% for Kerala and 33.6% for Tamil Nadu. While these states are growing better economically, there is clearly a need to boost employment in Kerala. The state is reported to have invested massively in building new road infrastructure in recent years and will now hopefully attract more private investment to the state in order to provide the people of Kerala adequate jobs. In Tamil Nadu, the effort has to be more in social infrastructure and more equitable growth.
Across the country, India needs to improve the state of its social infrastructure i.e., education and healthcare, as I keep writing on my blog. All four large states participating in this round of state assembly elections spend miniscule amounts on education and healthcare as a percentage of their GDP, even as their social sector spending remains high. In Assam and West Bengal, the need to create more jobs and raise investment in industry is all too obvious. Speaking of social sector spending, I am not sure what freebies and sops are being promised to voters in these elections, but I hope that better sense will guide political parties in their policymaking. Free bus rides for women have become a joke, when women need better jobs. And I hope farm loan waivers are also shunned as these can wreck state finances. This, even as farm subsidies might have to increase in the near future depending on how long the Iran war continues.
The communal problems being raised by politicians of all political parties only worsen the political and religious polarization in the eastern states and it is possible that people are forced to vote on emotive issues. One hopes that the electorate in both Assam and West Bengal will realise that the communal issues being raked up by political parties concerning illegal immigrants from a neighbouring country, Bangladesh, is nothing but communalising politics and fearmongering. The government at the Centre ought to resolve these issues with Bangladesh, as the current impasse cannot continue. With a new government in Bangladesh after elections there, hopefully both India and Bangladesh will resolve their differences and start engaging and doing business with each other once again. State governments should continue to focus on equitable economic growth and development for their people, and hopefully voters will continue to demand it from their political representatives.
Peripatetic Perch 